First-tier Tribunal (Tax)

[2010] UKFTT 188

TC00477

Appeal number:TC/2009/14431

Late payment surcharge – whether reasonable excuse on facts – No – Appeal dismissed – Section 59C Taxes Management Act 1970

FIRST-TIER TRIBUNAL

TAX

                                      A D ENGLAND as Trustee of

                 Mrs M E ENGLAND DISCRETIONARY WILL TRUST                                                        Appellant

                                                                      - and -

                                 THE COMMISSIONERS FOR HER MAJESTY’S

                                                   REVENUE AND CUSTOMS               Respondents

TRIBUNAL: John Brooks (Judge)

                        Chris Perry (Member)

Sitting in public at Vintry House, Bristol on 26 March 2010

Anthony England for the Appellant

Paul Calloway of HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.       This is an appeal against a late payment surcharge in the sum of £2,267.97 imposed under s 59C of the Taxes Management Act 1970 in respect of a late payment of tax due by 31 January 2009 but made on 7 July 2009.

2.       Where tax remains unpaid 28 days after the due date a taxpayer is liable to a surcharge equal to 5% of the unpaid tax and a further surcharge of 5% if the tax remains unpaid after six months.

3.       The Tribunal may set aside a surcharge if it appears that the taxpayer has a reasonable excuse for not paying the tax throughout the period of default. However, if there does not appear to be a reasonable excuse or it does not continue throughout the default period the imposition of the surcharge will be confirmed.

4.       There is no definition in the legislation of a “reasonable excuse” which “is a matter to be considered in the light of all the circumstances of the particular case” (see Rowland v HMRC [2006] STC (SCD) 536 at [18]).

5.       In this case Mr England was appointed as a joint executor with Veale Wasborough Executors and Trustee Company (a business operated by a firm of solicitors) under the will of his late mother who died on 18 November 2005. On the conclusion of the administration of her estate the executors became trustees of the M E England Discretionary Will Trust (the “Trust”) and in this capacity sold shares in February or March 2008 resulting in a capital gain for the Trust.

6.       A final executors’ tax return was submitted to HM Revenue and Customs (“HMRC”) on 28 October 2008. Box 21.3 of this return was ticked to inform HMRC that there was a continuing trust and we consider this to be notification of the existence of the Trust.

7.       In the absence of any response of the notification to the Trust Mr England wrote to HMRC on 23 February 2009 enclosing details of the Trust on ‘Form 41G(Trust)’. This letter was acknowledged by HMRC on 11 March 2009 with a reference number for the Trust stating that arrangements have been made for a 2008 Trust and Estate Tax Return to be sent to Mr England “as the first named Trustee”.

8.       Clearly a Return was sent to Mr England as this was completed by the Trustees and sent to HMRC on 21 April 2009. A calculation of the tax liability for 2007-08 was attached to the letter from HMRC, of 19 May 2009, acknowledging the Return. The letter warned that “you may need to make payments now. Tax due but paid late can lead to interest and surcharges.” The letter also indicated that payslips would normally be sent before each payment is due.

9.       A Late Payment Surcharge Notice was issued on 23 June 2009 and on 1 July Mr England wrote to HMRC stating that arrangement had been made to pay the tax (which was paid on 7 July 2009) and appealing against the surcharge on the grounds that he had not been sent a statement or a payslip to enable him to correctly discharge the liability.

10.    Mr England submits that in these circumstances he has a reasonable and continuing excuse for failing to pay the tax by the due date.

11.    He told us that although HMRC “make great emphasis that the dates for payment under self assessment are well publicised it is a great pity in all these communications no one at the Revenue thought to mention to me that, although no forms had been issued or Returns sent, I could make a payment on account of the liability by 28 February to avoid a penalty. These matters may be second nature and automatic to professionals but a lay man like myself does rely on the notifications received from the Revenue to comply with our obligations.”

12.    Having carefully considered the evidence and submissions of the parties we have come to the conclusion that there is not a reasonable excuse for the late payment of tax.

13.    First, Mr England is not a sole trustee; his co-trustee, Veale Wasborough Executors and Trustee Company, is a professional trustee company operated by solicitors for the purpose of administration of trusts. While we accept that Mr England takes responsibility for the day to day management and administration of the Trust and does not have a great deal of contact with his co-trustee, he told us that he does send draft accounts and returns for comment and approval and the solicitors concerned would been involved with the share sale in Spring 2008 giving rise to the tax liability on which the surcharge was based and, as professional trustees, ought to have been aware of the due date for payment of tax.

14.    Secondly, as Mr England became aware of the 2007-08 tax liability following receipt of HMRC’s letter of 19 May 2009 he could have taken steps to correctly discharge it sooner than 7 July 2009. As such, even if we were to find that Mr England did have a reasonable excuse it only continued until 19 May 2009 or shortly thereafter and not throughout the period of default.

15.    The appeal is therefore dismissed and the surcharge confirmed.

16.    This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

JOHN BROOKS

TRIBUNAL JUDGE

RELEASE DATE: 14 April 2010